Sir Robin Young, Permanent Secretary at the DTI, was given a terrible roasting when he appeared before the Commons Public Accounts Committee last week to help them with their inquiries into the near-collapse of British Energy, our major provider of nuclear power.

'A disaster - and you are responsible,' thundered one MP. 'Grotesque, unacceptable and dishonourable,' fumed another in respect of British Energy's penchant for making gargantuan payments to directors and shareholders even as the decks were starting to ignite around them. The taxpayer, it was noted, would pick up a £5 billion bill for nuclear liabilities.

Young mumbled that privatisation of British Energy had proved to be a jolly bad idea and that 'we' would not do it that way nowadays. Of course, 'we' never did it that way in the first place. It was one of the last and most venal Tory acts in the face of warnings that, in the end, the taxpayer would pay.

It was never truly possible to privatise a nuclear energy company. The stakes were so high that government remained the guarantor of last resort. Structures could be created within the private sector that allowed huge amounts of money to be extracted while the going was good. But when the party ended, government could not walk away.

As long as the wholesale price of electricity remained high, British Energy was perfectly capable of carrying the liabilities burden as well as enriching its nearest and dearest. But nuclear power stations cannot be switched off when the market collapses. Neither can costs be slashed beyond reasonable limits because, fortunately, there is a Nuclear Installations Inspectorate to regulate on safety.

In other words, it did not take Old Moore to predict that a halving in the wholesale price of electricity between 2001 and 2002 would drive British Energy to the verge of bankruptcy. The company cannot and should not be absolved of responsibility for its own considerable failings, but the inescapable fact is that they could not make a profit by selling electricity, as the market required them to do, at £12 per megawatt hour rather than £25.

Government - in particular the DTI - is literally paying the price of that fairly basic truism and will continue to do so for many years. By transferring the liabilities burden to the taxpayer, government has allowed British Energy to survive on a transformed financial basis. But the net outcome is that the nation's cheap electricity for a limited period has come at a high price.

Therein lies a wider issue that some Select Committee should take a look at. Who now determines the priorities of government energy policy on the basis of a bal anced national interest? It is all very well to criticise government for 'allowing' British Energy to go into freefall before rushing out a safety net made of taxpayers' money. But the even more disturbing question is whether government, having created an independent energy market regulator called Ofgem, was in a position to do anything about it. I both tried and failed.

Ofgem, which was established in the late 1990s, sang from only one song-sheet. Its ideological mis sion was to drive down the generated cost of electricity, full stop. Not difficult in an over-supplied market. But it soon became apparent that the by-products of this preoccupation were often deeply at odds with other aspects of government's policies and interests.

One of these unwelcome outcomes was the lemming-like progress towards a nuclear industry that could not pay its bills. But it was by no means the only one. The combined heat and power industry makes an interesting case study. In the late 1990s, government set CHP targets on environmental grounds that are actually higher - though we hear much less about them - than for renewable energy. They are now in tatters, largely because of the collapse in electricity prices, followed by continuing uncertainty.

Renewables themselves are at the centre of a running battle between government and regulator. Ofgem is not greatly interested in renewables because they lead to higher electricity prices. If government wants to encourage them through the Renewables Obligation for its own reasons that is up to it. But don't ask Ofgem to dilute its theology - a large part of which is to minimise costs by generating, clean or dirty, from as close to markets as possible. The outcome of that argument will largely determine whether or not Britain meets its renewables targets.

There is a lot to be said for independent regulation and some in government value its most obvious attraction: it allows them to transfer difficult decisions to someone else while congratulating themselves on deferral to an 'independent' body above vulgar politics. I have never bought this argument.

It seems to me that if the lights go out or if we fail to meet our renewables targets, the buck will very properly stop with elected politicians, not with regulators whom we have allowed to usurp the decision-making role.

· Brian Wilson was Energy Minister from 2001-2003 and is now the Prime Minister's Special Representative on Overseas Trade.